Mercer Island faces difficult budget choices

The city of Mercer Island is continuing to make cuts following the failure of a proposed levy increase during last year’s November election.

The city said the levy increase would have been used to maintain current levels of emergency services, mental health counseling, park maintenance and recreation services by increasing property taxes by roughly 24 cents per $1,000 of assessed property value. The city projected it would have a financial deficit of around $1.86 million in the 2019 general fund and youth and family services fund, a number which was expected to increase by $1.12 million annually to roughly $7.42 million by 2024.

In its 2019-2020 budget, the city made reductions to its Youth and Family Services department, including cutting hours for two staff positions and eliminating two full-time school mental health counselor positions. In Parks and Recreation, vacant positions will be left unfilled and one full-time special events coordinator position was cut. Those cuts will reduce the number of community events, limit maintenance and stewardship activities and has already limited the community center’s hours.

Other proposed cuts include the deputy fire chief position, and the police department will leave one full-time patrol officer position vacant. Still, the city is projecting a $3.7-million deficit starting in 2021 which will likely result in more cuts.

The city said it has been hamstrung by the 2001 voter-approved Initiative 747, sponsored by conservative anti-tax advocate Tim Eyman. That initiative limits the amount local governments can raise property taxes to 1 percent each year, which is generally below the rate of inflation.

The Proposition 1 was debated on the Island, with the group Mercer Islanders for Sustainable Spending ultimately triumphing as about 58 percent of voters struck down the levy increase. Mike Cero works with the organization and said he doesn’t believe the dire economic forecasts coming from the city and that the city should be focused on making effeciencies instead of cuts.

“It’s always been an expense problem, and not a revenue problem,” he said.

Cero said many of the cuts have been done through random attrition and not a systematic evaluation of priority in the city government. He gave the example of an employee responsible for the annual Summer Celebration leaving, and the city’s subsequent decision not to hold it this year, as an example.

“I would like to see them evaluate how they can do things, provide services more efficiently, (and) I would like to see them return their contingency fund policy back to the tried and true 10 percent of the general fund expenses,” he said.

Cero also suggested the marine patrol could reduce their fleet from three boats to two.

Others on the Island, like Leslie Meagley who was part of the pro-proposition group Islanders YES, said the city council and staff warned residents that cuts would be coming if the measure failed on the ballot.

“We’re expecting that we’re going to continue to see service reductions this year and more severe in the coming year,” Meagley said. “Many of those people are beginning to see effects, particularly in the parks department.”

However, until the city implements its planned cuts it may be too soon for the community to actually get a sense of what they will mean for residents.

“I think the most important thing is for the community to understand that the cuts are very real,” she said.

Mercer Island city manager Julie Underwood said the city is constantly trying to find efficiencies. The majority of the general fund goes towards personnel costs and the city has to find a balance between saving money and attracting employees.

“We have to find efficiencies — I have to do both,” Underwood said. “I have to find efficiencies and I have to cut $5 million. I can’t balance the budget all on efficiencies. Let me be frank — I can’t do that. I can’t pretend I can do that.”

Mercer Island has a general fund of about $30 million, Underwood said. For the 2019-2021 budget she is expecting to see about $2.7 million in reductions, including programs like the Summer Celebration, recreation events, senior programs and gift baskets for businesses. Those are programs deemed not essential to the city’s operations. The city has additionally hired an outside firm to review economic forecasts and projections.

“It’s a full-service city. We have our own police department, our own fire department, we have a public works department that does all our own roads,” Underwood said. “There’s a lot on our plate.”

The general fund is separate from dedicated funds which are not effected. A general fund is essentially money the city government can allocate to cover expenses, including emergency services which soaks up a substantial portion of it. Additionally, Underwood said the city is trying to avoid using its reserve funds to balance the budget, which would be exhausted by 2022 if they maintained their current level of spending.

While cities across the state are facing funding challenges from the 2001 voter-approved I-747, Mercer Island has a unique set of problems which compounds its funding difficulties. Roughly 3 percent of the Island is zoned for commercial or retail, meaning only about 20 percent of the city’s general fund comes from sales taxes.

Much of the city’s budget is tied to property taxes, Underwood said. Short of rezoning or expanding the small business district on Mercer Island, the city will be reliant on property taxes in the future too.